Canada market intelligence: stable, not yet strong 

Economic and construction market overview  

Canada’s economy ended 2023 on a positive note, with gross domestic product rebounding in the final quarter and outperforming the Bank of Canada forecast made this time last year. Yet growth remains slow, and 2024’s prospects look subdued. Construction industry output fell in all four quarters of 2023, though there were bright spots in the buoyant industrial and manufacturing, natural resources and infrastructure subsectors. By contrast, residential workloads are still reeling from persistently high interest rates and suppressed investment levels. 

Wide variations can also be found at a provincial level. Built-up regions with major residential commitments, such as Ontario and British Columbia are weaker, while Alberta remains a hub of construction activity.   

How market conditions are shaping escalation forecasts 

Construction escalation remains on an upward trajectory but is becoming more manageable and less volatile. Factors informing escalation forecasts include prolonged softening across several sectors and provinces, material cost reductions and easing lead-times. People pressures are also alleviating and although shortages still persist, wages continue to rise. 

 
Our 2024 escalation estimate has increased slightly from 2.5 percent to 3.0 percent. Early 2024 activity has been positive, yet muted client demand is bringing more competition to the bidding process which should allow lower materials costs to feed through to clients more readily.  

From inflation to insolvency   

Despite the positive outlook, an emerging key issue to be of concern in the Canadian construction industry is the risk of insolvency. Inflation concerns have taken precedence, and so the more subtle danger of contractor insolvency has passed largely unnoticed. Now as cost escalation eases, the threat landscape is changing.

While the gravity of these two intertwined risks varies between sectors and provinces, insolvency may rise to become a significant barrier to project success.